Answer to Question #253505 in Microeconomics for Tisha

Question

If the price of profiteroles decreases from $1.10 to $0.90, and the quantity demanded of profiteroles does not change, then the price elasticity of demand, obtained using the midpoint method, is:

Answer 1

% change in price$=\frac{1.10-0.90}{\frac{1.10+0.90}{2}}\times100=20$%

% change in quantity = 0%.

Price Elasticity of Demand $=\frac{0}{20}=0$

The value of elasticity indicates that demand for the product is perfectly inelastic. This is because a change in price has no impact on quantity demanded.